In Opposition Of H.R. 3606—The Jumpstart Our Business Startups Act

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Mr. Speaker, on March 8, I voted against H.R. 3606, the Jumpstart Our Business Startups Act. H.R. 3606 has the admirable goal of increasing access to capital for small businesses, a goal that I strongly support. Unfortunately, I cannot support the legislation because, at the same time that it seeks to help small businesses, it takes away critical protections for investors.

In the wake of the Enron scandal, Congress acted to improve corporate transparency and give potential investors--particularly small investors--access to the information they need to make sound financial decisions. H.R. 3606 eliminates many of those provisions and, by doing so, leaves unsophisticated investors vulnerable. We can and should promote the interests of American entrepreneurs and small business owners without taking away recently passed rights for small investors. It is the wrong medicine for American small business growth.

The bill would give new companies up to five years to raise money from the public, eliminating the current requirements that an assessment of the soundness of the company's internal controls be included as part of the financial statement audit and made available to investors. That allows companies to raise money from unsophisticated investors without reasonable oversight of a company's operations.

It would enable crowd-funding, mass solicitations to investors who will now lack basic information about a company's financial soundness, a practice that is not currently allowed.

H.R. 3606 would increase the amount of capital that companies can raise from the public without triggering the full reporting and other obligations that are required under current law. That reporting includes compensation--including golden parachute compensation--of executives, making it incredibly difficult for even sophisticated shareholders to understand the status of their investment. In addition, it eliminates the Dodd-Frank requirement that shareholders approve compensation packages for emerging growth companies.

The JOBS Act would promote uncertainty, undermine capital markets, and therefore increase the cost of capital for the same small businesses it is meant to help. It would put us on a return course toward laissez-faire economics that previously led to the collapse of enormous companies to the economic ruin of their employees and investors. It is for these reasons that H.R. 3606 is opposed by the Council of Institutional Investors, the Consumer Federation of America, AARP, Americans for Financial Reform, the North American Security Administrators Association, and other consumer and investor organizations.

I urge my colleagues in the Senate to consider the ramifications of this legislation if it comes up for consideration.

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